RAMOS VS CA

FACTS:

On August 14 and 26, 1969, CMS Stock Brokerage, Inc. (or CMS) sold LLL on the floor of the Makati Stock Exchange (or MSE) 2,650 shares of Benguet Consolidated Corporation on a delayed delivery basis of 10 to 20 days, evidenced by Exchange Contracts . LLL bought the shares for the account of its clients, the third-party defendants, Rene Ledesma, Jose Maria Lopez, Cesar A. Lopez, Jr. and Alfredo Ramos. CMS failed to deliver the shares of stocks within the agreed period, but LLL did not demand delivery.On January 6, 1970, CMS informed LLL that it would deliver the shares the next day. LLL wrote CMS that it would not accept the shares because its principals had cancelled their orders. , LLL alleged that as a result of CMS’s failure to deliver the shares within the agreed time frame, Ramos (ONE OF THE 4 PRINCIPALS) cancelled his order, disauthorized LLL from accepting a subsequent delivery by CMS, and agreed to hold LLL free from any liability for his non-acceptance of the shares.Accordingly, CMS filed in the CFI of Rizal a complaint to compel LLL to accept the Benguet shares, to pay the price of P297,650, as well as P25,000 as attorney’s fees and costs. On June 7, 1972, CMS filed a motion for summary judgment. On August 10, 1972, the trial court rendered a summary judgment in favor of CMS. On appeal (CA-G.R. No. 52432-R), the Court of Appeals affirmed the trial court’s decision except the awards for damages and attorney’s fees, and remanded the case for the reception of evidence on the plaintiffs claims for damages and attorney’s fees.

Issue: 

whether or not LLL has the right to rescind.

Held :

No.RIGHT TO RESCIND; MAY BE WAIVED BY CONTRACT.

 Petitioner invokes Articles 1191, 1165 and 1169 of the Civil Code on the right of a party to rescind a contract in case one of the obligors should not comply with what is incumbent upon him. That right, however, may be waived by contract, as in this case, where CMS and LLL had agreed to abide with the Rules and Regulations of the Exchange of which they were members, which rules provide for a remedy, other than rescission, when a party fails to deliver on another’s order to buy shares.

SECURITIES AND EXCHANGE COMMISSION RULE IN CASE SELLING MEMBER FAILS TO DELIVER ORDERED SHARES OF STOCK.

— As observed by the trial court, Section 1, Article V of the Exchange Rules does not vest on the buyer, respondent LLL, a right to rescind its contract with CMS upon the latter’s default. The Exchange Rules obligate the buyer to make a demand, and if the selling member fails to deliver the ordered shares despite the demand, the buyer is further obligated to deliver a copy of his demand letter to the Chairman of the Floor Trading and Arbitration Committee so that the latter may purchase the shares for the selling member’s account. Said rules were held binding on members of the Exchange (Lopez, Locsin, Ledesma & Co., Inc. v. Court of Appeals, G.R. No. L-41291, December 8, 1988). Inasmuch as petitioner placed his order for Benguet shares through a member of the Exchange (LLL), he is indirectly bound by the rules of the Exchange.

Petition dismissed.